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ECON 460-COMB Ch06Quiz

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Consider the following general model specification: ๐‘Œ = ๐‘“ ( ๐‘‹ 1 , ๐‘‹ 2 , ๐‘‹ 3 ๐‘‹ 4 , ๐‘‹ 5 , ๐‘‹ 6 , ๐‘‹ 7 , ๐‘‹ 8 ) . Where the 9 variables are: Y = Test score of the mid-term exam X1 = Time spent studying for the exam X2 = Degree of course difficulty (measured by an index #) X3 = Class size (number of students) X4 = Experience/knowledge of the teacherย ย  X5 = Studentโ€™s college experience (college credits previously earned) X6 = Quantity of the studentโ€™s outside (non-academic) activities X7 = Level of the studentโ€™s determination to succeed (measured by an index #) X8 = Dummy (=1 if the course is face-to-face; 0 otherwise (online)) For each of the 2 cases of omitted variables below, determine the sign (positive/negative) of the bias โ€“ you must complete columns 3, 4, and 5 in the table below.ย  Case OM IN ๐›ฝ ๐‘‚ ๐‘€ ๐›ผ 1 โˆ’ โ„Ž ๐‘Ž ๐‘ก BIAS 1 X5 X6 Sign is [ Select ] negative positive Sign is [ Select ] negative positive Bias is [ Select ] negative positive 2 X4 X1 Sign is [ Select ] negative positive Sign is [ Select ] negative positive Bias is [ Select ] negative positive

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We are given a general model where Y is a function of eight variables X1 through X8, and we are asked to assess the sign of omitted-variable bias when two different variables are omitted in two separate cases. For each case, we consider the direction of the true relationship between the omitted variable and Y (does the omitted variable increase or decrease the expected Y?), and the relationship between the omitted variable and the included regressor (how the omitted variable correlates with the regressor that remains in the model, here X1). The sign of the bias in the coefficient on X1 depends on the product of these two directions, following the intuition of omitted-variable bias in OLS. Case 1: OM = X5 (studentโ€™s college experience), IN = X6 (quantity of outside activities). - Step 1: What is the correlation between X5 and Y? Intuitively, mo......Login to view full explanation

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